From Wikipedia, the free encyclopedia

Energy policy of Australia is subject to regulation
and fiscal influence of the three levels of Government in
Australia, however State and Federal energy policy deals with primary industries, such as coal.

State energy policies such as Mandatory Renewable Energy Targets
ensure that renewable energy contributes a greater percentage of
the countries energy supply.

Due to Australia's reliance on coal and gas for energy, in 2000
the country was the highest emitter of greenhouse gases
per capita in the developed world, irrespective of
whether or not emissions from land clearing were included.[3] It is
also one of the countries most at risk from climate change
according to the Stern report.

Power
production

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Coal fired
power

The main source of Australia's electricity generation is coal.
In 2003, coal-fired power plants generated 77.2% of the country’s
total electricity production, followed by natural gas (13.8%),
hydropower (7.0%), oil (1.0%), biomass (0.6%) and solar and wind
combined (0.3%).[5]
Coal-fired plants also constitute a majority of generating
capacity. The total generating capacity was approximately 44,771 MW
in 2002.[6]
Depending on the price of coal at the power station, the long run
marginal cost of coal based electricity at the power stations in
eastern Australia is between 3 and 5 cents per kWhr, which is
between $30 and $50 per MWhr. In Victoria brown coal stations
produce electricity for less than $30 per MWhr.[7]
In 2003, coal fired plants produced 58.4% of the total capacity,
followed by hydropower (19.1%, of which 17% is pumped storage),
natural gas (13.5%), liquid/gas fossil fuel-switching plants
(5.4%), oil products (2.9%), wind power (0.4%), biomass (0.2%) and
solar (0.1%).[8]

Wind
power

As at June 2009 wind power generation capacity is 1.494 GW [10] and
accounts for about one per cent of national electricity generation,
some 9 per cent in South Australia.[11] A
Carbon Market Economics report projects over 10 GW of new wind
power capacity by 2016 is possible if renewable energy targets are
met.[12]

Solar
power

Solar energy is used as a "fuel" for heating water, in addition
to its role in producing electricity through photovoltaics.

Less than 1 per cent of Australian electricity currently comes
from solar power generation.[9]
This is mainly due to the higher cost per kW than other power
sources because of the cost of solar panels. Innovative
applications of photovoltaic technology being developed in
Australia include concentrating systems to focus the solar energy
on to a smaller area of higher efficiency cells and the use of building integrated photovoltaics, where
the PV cells perform architectural or structural functions as well
as power generation, thereby offsetting some of the cost.[13]

A major 154 MW photovoltaic (PV) Solar
power station in Victoria is planned, which will be the biggest
and most efficient solar photovoltaic power
station in the world. The power station will cost $420 million and
have the capability to concentrate the sun by 500 times onto the solar cells for ultra
high power output. The Victorian power station will generate clean
daytime electricity directly from the sun to meet the annual needs
of over 45,000 homes with zero greenhouse gas
emissions.[14]

Wave
power

The Australian government says new technology harnessing wave energy could be
important for supplying electricity to most of the country's major
capital cities. A wave
farm near Fremantle in Western Australia operates through a
number of submerged buoys, creating energy as they move with
passing waves. The Australian government has provided more than
$US600,000 in research funding for the technology developed by
Carnegie, a Perth company.[15]

Queensland introduced legislation to ban nuclear power
development on 20 February 2007.[16]
Tasmania has also banned nuclear power development.[17] Both
laws were enacted in response to a pro-nuclear position, by John Howard in 2006
[18], and
the release of the Switkowski report into nuclear
power.[19]

An independent panel of Australian scientists and nuclear
experts have been critical of the findings of the Switkowski
nuclear inquiry. They found that the Switkowski report relies on
some flawed assumptions which reveal a bias towards nuclear power
on economic, technological, health and environmental grounds.[20]

John Howard went to the November 2007
election with a pro-nuclear power platform but his government
was soundly defeated by Labor, which is opposed to nuclear power
for Australia.[21][22]

Costs

Coal fired power stations produce electricity between 3 and 5
cents per kWhr, which is between $30 and $50 per MWhr. In Victoria
brown coal stations produce electricity for less than $30 per
MWhr.[7]
. Coal subsidies from the government are the second largest
associated with fuel subsidies. Due to domestic production, coal
fired power stations pay much less for fuel than the international
market price. Major Australian power plants such as Macquarie
Generation, CS Energy, Stanwell and Delta Electricity pay 1.36
cents/kWh. By comparison, coal-dominated utilities in the United
States paid 1.37-2.44 cents/kWh.

The coal power stations receive subsidies which are calculated
to be between $450 million and $1.1 billion in 2005-06. Currently,
the subsidies received by several electricity generation companies
prioritising in coal-fired generation appear to match or exceed the
profits made by those companies in 2005-06. In other words,
government subsidies appear to be directly creating profits for
coal-fired generators.

The impact of removing certain electricity sector subsidies will
increase the cost of electricity by about $0.05/kW or 3.9%. This
would decrease demand for electricity by 1.4% and also reduce GHG
Emission by about 2.7 Mt CO2-e.

The $400 million Greenhouse Gas Abatement Program (GGAP) has
already invested in 15 projects totaling $145 million to diminish
27 million tonnes of GHG during 2008-2012.[23]

Depreciation

The major Australian coal-fired power stations (Delta
Electricity, CS Energy, Stanwell) have a 0.23 cents per kWh
depreciation charge for their plants. On average, the cost of
buying a plant is about $220/kW compared to the international
market of $1300/kW. As these power plants age over time, their
asset values decline and thus form a subsidy of $189/kW. This in
turn equates to a power generation subsidy of 0.2 cents/kWh.

From 2005-06, 141TWh of electricity was harvested, with a total
of $284 million for concession subsidies. All of these
subsidies:

lower the cost of coal firing

encourage increased coal firing and depletion of fossil fuel
sources

produce higher levels of GHG emissions

These subsidies that encourage coal firing are distorting the
energy market. The removal of this subsidy would cause coal power
stations to lose profitability. They would be forced to raise their
electricity prices to regain profits in order to compete with other
energy methods. [24]

Geothermal

There are vast deep-seated granite systems, mainly in Central
Australia, that have high temperatures at depth and these are
being drilled by 19 companies across Australia in 141 areas. They
are spending AU$654 million on exploration programmes. South
Australia has been described as "Australia's hot rock haven" and
this emissions-free and renewable energy form could provide an
estimated 6.8% of Australia's base load power needs by 2030.
According to an estimate by the Centre for International Economics,
Australia has enough geothermal energy to contribute
electricity for 450 years.[25]

The 2008 Federal Budget allocated $50m through the Renewable
Energy Fund to assist with 'proof-of-concept' projects in known
geothermal areas. [26] .

Biomass

Biomass power plants use
crops and other vegetative byproducts to produce power similar to
the way coal-fired power plants work. Another product of Biomass is
extracting ethanol from sugarmill byproducts. The GGAP subsidies
for Biomass include ethanol extraction with funds of $7.4 million
and petrol/ethanol fuel with funds of $8.8 million. The total $16.2
million subsidy is considered as a renewable energy source
subsidy.

Biodiesel

Biodiesel is an alternative to fossil fuel diesels that can be
used in cars and other internal combustion engine vehicles.
It is produced from vegetable or animal fats and is the only other
type of fuel that can run in current unmodified vehicle engines.
The advantages of using biodiesels are summarised below:

can be mixed with normal fuels (B20 is the common biofuel
mixture consisting of 20% biodiesel and 80% petrol)

Subsidies given to Ethanol oils totaled $15 million in
2003-2004, $44 million in 2004-2005, $76 million in 2005-2006 and
$99 million in 2006-2007. The costs for establishing these
subsidies are $1 million in 2005-2006 and $41 million in
2006-2007.[28]

However, with the introduction of the Fuel Tax Bill, grants and
subsidies for using Biodiesel have been cut leaving the public to
continue using diesel instead. The grants will be cut by up to 50%
by 2010-2014. Previously the grants given to users of ethanol-based
biofuels were $0.38 per litre, which will be reduced to $0.19 in
2010-2014. [29][30]

Fossil
fuels

Oil

Petrol

In the transport sector, fuel subsidies reduce petrol prices by
$0.38/L. This is very significant, given current petrol prices in
Australia of around $1.20 per litre. The acceptable petrol prices
hence result in Australia's petroleum consumption at 28.9 GL every
year. [31]

Removal of this subsidy will make petrol prices rise to around
$1.60/L and thus could make certain alternative fuels competitive with
petroleum on cost. The 32% price increase associated with subsidy
removal would be expected to correspond to an 18% reduction in
petrol demand and a Greenhouse Gases emission reduction of 12.5 Mt
CO2-e.[32]

Diesel

The subsidies for Oil-Diesel fuel rebate program are worth about
$2 billion, which are much more than the grants devoted to
renewable energy. Whilst renewable energy is out of scope at this
stage, an alternative diesel-renewable hybrid system is highly recommended. If
the subsidies for diesel were bounded with the renewable subsides,
remote communities could adapt hybrid electric generation systems. [33]
Energy Grants Credit Scheme (EGCS) : off-road component is a
rebate program for diesel and diesel like fuels.

Petroleum
subsidies

Companies involved in the extraction of the fossil fuel
petroleum are given special deductions as follows:

encourages investment in the 'finite' supplies of oil, at the
same time considering alternatives

removal will affect low income households

Natural
gas

Australia's natural gas reserves are estimated to be 3,921
billion cubic metre (bcm), of which 20% are considered commercially
proven (783 bcm). The gas basins with the largest recoverable
reserves are the Carnarvon and Browse basins in WA, the Bonaparte
basin in the Northern Territory, the Gippsland and Otway basins in
Victoria and the Cooper-Eromanga basin in SA and Queensland. In
2003-2004, Australia produced 33.2 bcm of natural gas, of which 62%
was produced in WA. The majority of WA gas is sourced from the
North West Shelf. Australia produces also LNG. In 2004, LNG exports
were 7.9 Mt (10.7 bcm), which represented 6% of world LNG
trade.[34]

GGAP provides $26 million in subsidies for construction of
natural gas fired power plants.

In addition, Australia owns a large potential for deposits of
coal seam methane (CSM). The majority of these deposits are located
in the black coal deposits of Queensland and NSW.[34]

Oil shale

Australia's oil shale
resources are estimated to be around 58 billion tonnes or 4,531
million tonnes of shale
oil. The deposits are located in the eastern and southern
states with the biggest feasibility in the eastern Queensland
deposits. Between 1862 and 1952 Australia mined 4 million tonnes of
oil shale. The mining stopped when government support for mining
ceased. More recently, from the 1970s on, oil companies have been
exploring possible reserves. From 2000 to 2004 a demonstration-scale processing
plant at the Stuart Deposit near Gladstone, Queensland produced
over 1.5 million barrels of oil. The facility is now on
care-and-maintenance in an operable condition, and the operator of
the plant — Queensland Energy Resources
— is conducting research and design studies for the next phase of
its oil shale operations.[40]
A campaign by environmentalists opposed to the
exploitation of oil shale reserves may also have been a factor.[41]

In June 2008 it was revealed a joint venture between MEC
Resources and Bounty Oil had begun plans to establish offshore oil
drilling facilities between the Central Coast and Newcastle.[42]

Deforestation is not included in the scheme where there will be
reforestation in spite of the significant timing differences,
uncertainty of reforestation and effect of leaving old growth
forests vulnerable.

It is unclear what level of carbon price will be sufficient to
reduce demand for coal fired power and increase demand for low
emissions electricity like wind or solar.

The scheme fails to address climate change caused by burning of
coal exported from Australia.

Energy
market reform

On 11 December 2003, the Ministerial Council on Energy released
a document entitled “Reform of Energy Markets”. The overall purpose
of this initiative was the creation of national electricity and natural gas markets
rather than state-based provision of both. As a result, two federal
level institutions, the Australian Energy Market Commission (AEMC)
and the Australian Energy Regulator (AER), were created.[44]

Subsidies

The Australian Government provides financial support for the
production and implementation of all forms of energy development.
These include direct payment and tax reductions. In 2001,
Australia's subsidies for the fossil fuel related market alone
exceeded $6.5 billion. [45]
Between 2005 and 2006, Australia's subsidies for the Energy Market
ranged from $9.3 to $10.1 billion. The subsidies for fossil fuels
account for 96%. 4% of the available funds for renewable and
transport technologies.

Subsidies by sector

Transport 74% at AU$7.2 billion

Electricity 18% at AU$1.7 billion

Other Stationary 8% at AU$806 million

Total subsidies that support production and consumption of
different fuels

Energy
subsidy

Public
agency subsidies

Geoscience Australia, the
Department of Industry, Tourism and Resources & State
Government energy departments are involved in the direct support of
mining and fossil fuel exploitation. These agencies only provide
subsidies if there is a benefit to a particular group. As forecast,
the main groups concerned are from the coal industry. Thus, by
providing subsidies to the coal-fired power industry, there will be
an increase in fossil fuel production, lower coal costs and
inevitably an increase in greenhouse gases
(GHG).

Geoscience Australia (GA) provided a AU$107 million subsidy for
energy in 2005–06. The 2006–07 budget involved 66 projects of which
11 are allocated to petroleum research and others related to
mineral and mining industry. On a much smaller scale, the subsidy
allocated to saving climate change was 'storage of GHG' with a
subsidy of $0.6 million.[47]

The Department of Industry, Tourism and Resources (DITR),
similarly to GA, provided a AU$30 million energy technology fund in
1994–95. This increased to a government-funded $1,314 million
subsidy which divides into 52 branches.

95% of Australia's electricity originates from fossil fuels,
which make the power industry quite profitable. The DITR supports
fossil fuel research with 95% of its total budget, leaving less
than 5% for renewable energy technology.[48]

Transport
subsidy

Currently, 82% of all Australians live in towns and cities with
a population of 25,000 or more, and by 2011 almost 62% will be
living in the 5 major state capitals. According to the 'Peak Oil
Phenomenon', when Oil
reserves are at less than 50%, refining oil will be harder and
cost more money. However, Australia has an alternative - natural
gas reserves, which are abundant throughout the states. Due to the
current fossil fuel (including oil) subsidies making oil refinement
cheaper, natural gas extraction is ignored.[49]

In 2005-06, the road construction costs was AU$4.7 billion more
than the revenue received by road users. This makes the Road User
Deficit the largest subsidy in the transport sectors.

Largest government revenue in transport is AU$0.38/L fuel

Old Scheme - Energy Grants Credit Scheme - reduced fuel revenue
by AU$3.5 billion, with the addition of different fuels like LPG
and natural gas which reduced fuel revenue by AU$710 million

New Scheme - Fuel Tax Credit Scheme - allows a wide range of
fuels and activities to be eligible for rebates and therefore the
'Road User Deficit' subsidy will increase.

South
Australia

The South Australian Government has developed an Energy policy
based on sustainability objective as well as on South Australia's
Strategic Plan.

A major priority of South Australia’s Strategic Plan is to
reduce greenhouse gas emissions in South Australia to achieve the Kyoto
target as a first step towards reducing emissions by 60% (to 40% of
1990 levels) by 2050.

Measures announced in South Australia include:

stabilisation of greenhouse pollution by 2020

legislated cuts of 60% in greenhouse pollution by 2050

legislated renewable energy target of 15% by 2014

solar feed-in tariff

ban on electric hot water systems.

Victoria

Western
Australia

In some remote areas of WA, the use of fossil fuels is expensive
thus making renewable energy supplies commercially competitive. WA
offers renewable energy subsidies including; solar heaters,
Photovoltaic rebate program for installations at households,
schools, factories and renewable Remote Power Generation Program of
>$500,000 rebates for large off-grid systems.[50][51]

Mandatory renewable energy
targets

An Expanded Renewable Energy Target was passed by the Australian
Parliament on 20 August 2009, to ensure that renewable energy
obtains a 20% share of electricity supply in Australia by 2020. To
ensure this the Federal Government has committed that the MRET will
increase from 9,500 gigawatt-hours to 45,000 gigawatt-hours by
2020.The scheme lasts until 2030.[52]

Greenhouse gas
emissions reduction targets

Coal is the most carbon-intensive energy source releasing the
highest levels of carbon dioxide into the atmosphere.

South Australia, legislated cuts of 60% in greenhouse pollution
by 2050 and stabilisation by 2020 were announced.

Victoria announced legislated cuts in greenhouse pollution of
60% by 2050 based on 2000 levels.

NSW announced legislated cuts in greenhouse pollution of 60% by
2050 and a stabilisation target by 2025.

Low
Emissions Technology Demonstration Fund (LETDF)

$500 million - competitive grants

$1 billion - private sector funds

Currently has funded six projects to help reduce GHG emissions,
which are summarised below

82% of subsidies is concentrated in the Australian Government's
'Clean Coal Technology', with the remaining 18% of funds allocated
to the renewable energy 'Project Solar Systems Australia' $75
million. The LETDF is a new subsidy scheme aimed at fossil fuel
energy production started in 2007. [53]

Feed-in
tariffs

Each state and territory has a different position on feed-in
tariffs. In summary, as at 26 May 2008, no state or territory has a
general, operating feed-in tariff which creates a positive
financial return for investing in roof top solar photo-voltaic
power. Such a scheme has resulted in Germany being one of the
largest producers of solar photo-voltaic power in the world. South
Australia, Queensland and Victoria are expected to have such
schemes operating by the end of 2008. The other states and
territories have not announced any intention to legislate for an
incentive scheme. Under a limited federal Solar Cities program,
Alice Springs has such a scheme.

In November 2008 an Australian Senate committee chaired by Labor
Senator Anne McEwen recommended further scrutiny of a renewable
energy feed-in tariff before it is rolled out nationally. The
committee has recommended that such a scheme be put to the Council
of Australian Governments. Some states already have a tariff to
encourage investment in renewable energy, and the Greens have
introduced a bill for a national scheme.[54]

Fuels

In 2003, Australian total primary energy supply (TPES) was 112.6
million tonnes of oil equivalent (Mtoe) and total final consumption
(TFC) of energy was 72.3 Mtoe.[55]

Coal

Australia is the fourth-largest coal producing country in the world. Newcastle is the largest
coal export port in the world. In 2005, Australia mined 301 million
tonnes of hard coal and 71 million tonnes of brown coal.[56]
Coal is mined in every state of Australia. It provides about 85% of
Australia's electricity production and is Australia's largest
export commodity.[57]
75% of the coal mined in Australia is exported, mostly to eastern
Asia. In 2005, Australia was the largest coal exporter in the world
with 231 million tonnes of hard coal.[56]
Australian black coal exports are expected by some to increase by
2.6% per year to reach 438 million tonnes by 2029-30, but the
possible introduction of emissions trading schemes in customer
countries as provided for under the Kyoto protocol may
affect these expectations in the medium term.

The IPCCAR4 Working Group
III Report "Mitigation of Climate Change" states that under
Scenario A (stabilisation at 450ppm) Annex 1 countries (including
Australia) will need to reduce greenhouse gas emissions by 25% to
40% by 2020 and 80% to 95% by 2050.[59] Many
environmental groups around the world, including those represented
in Australia, are taking direct action for the dramatic reduction
in the use of coal as carbon capture and storage
is not expected to be ready before 2020 if ever commercially
viable. [60]

Public
opinion

The Australian results from the 1st Annual World Environment
Review, published on June 5, 2007 revealed that:[61]

86.4% are concerned about climate change.

88.5% think their Government should do more to tackle global
warming.

79.9% think that Australia is too dependent on fossil
fuels.

80.2% think that Australia is too reliant on foreign oil.

89.2% think that a minimum 25% of electricity should be
generated from renewable energy sources.

25.3% think that the Government should do more to expand
nuclear power.